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- Manlobbi
Personal Finance Topics / Macroeconomic Trends and Risks❤
No. of Recommendations: 5
Some of the basic conditions of a financial crisis are at least starting to fall into place:
We have a big story about why “this time is different” — the idea that AI will change everything, and that data centers will thus earn huge returns.
We have a large and increasing amount of debt being used to fund one single sector of the economy (data centers), meaning that the loans’ default probability is probably highly correlated.
We have an opaque corner of the financial system (private credit) that has recently grown from a tiny piece of the system to a very significant piece.
We have systemically important lenders (banks, and possibly insurance companies) enmeshed in the new sector in a multitude of ways.
https://www.noahpinion.blog/p/will-data-centers-cr...
No. of Recommendations: 17
You could do a pretty long thread on "signs of the times" suggesting we are seeing end of cycle.
* Meme stocks are back.
* US average tariff rate just popped up above the rate right after the 1930 Smoot-Hawley Tariff went into effect. The 1930s were so great.
* The regulatory gloves are off in crypto. ("Everything you don't understand about money, combined with everything you don't understand about computers"--John Oliver in 2018)
Even on a short term basis, omens are not great. Breadth appears to be rolling over even as the markets hit fresh highs. It doesn't mean a market top, but most market tops do include that.
Personally I would not say we're at the stage of recommending heading immediately for the hills, simply because insanity can really go on for a while sometimes. As a gut feel, to me the mood seems more like early 1999 than early 2000, more like mid 2007 than mid 2008. Crypto developments seem more reminiscent of the introduction of CDO-squared, not the start of the defaults.
Another interesting effect is the "K shaped" economy. There are arguably two entirely separate US markets, divided by politics. One set is very bullish and optimistic, the other is battening the hatches. The companies and securities that cater to the two groups are seeing diverging business conditions. Pickup truck sales are booming, battery EV sales are flattish. If you consider the US as having split into two markets, it's conceivable we might observe a recession and bear market in one but not the other : )
Jim
No. of Recommendations: 1
There are arguably two entirely separate US markets, divided by politics.
In this connect, I wonder what it means that, as I have read, 70% of American GDP is accounted for by counties (not states) won by President Biden.
Baltassar
No. of Recommendations: 0
70% of American GDP is accounted for by counties (not states) won by President Biden.
Tricky question, because it depends where GDP is calculated, and why. At the factory? At HQ? Or some tax haven outside the US? Or...????
No. of Recommendations: 1
What I found interesting when I was watching the presidential election results was that you could pick out where cities were located by the blue splotches on the country's map. To a great extent, reegardless of the reasoning, what we seem to be seeing is a devide between urban and rural.
Jeff
